Lawyers Defend Their Stand In Insurance Cases

January 21, 1986|By John F. Persinos of The Sentinel Staff

LAKE BUENA VISTA — Insurance companies and their business customers are misrepresenting their losses and using trial lawyers as ''whipping boys'' in an attempt to undermine the rights of injured people, a group of trial lawyers charged Monday.

''There's a conspiracy to roll back the common law rights of citizens in liability cases,'' warned Edward Swartz, a Boston lawyer and consumer advocate. ''Liberals as well as conservatives believe that businesses are being extorted on their product-liability insurance, and they're making trial lawyers the whipping boys.''

Swartz and other trial lawyers spoke at a national conference of The Association of Trial Lawyers of America. More than 1,500 association members are attending the convention this week at Lake Buena Vista Palace.

Rising premiums and shrinking coverage for commercial insurance have touched off a virtual crisis in the business world, with companies of all sizes -- from trucking lines to day-care centers -- finding it expensive or impossible to maintain coverage.

One of the segments hardest hit is product-liability insurance, which has been seen a proliferation of lawsuits charging manufacturers with designing or producing faulty products.

According to the National Association of Manufacturers, the average product-liability award in the United States in 1974 was $345,000; by 1984, it exceeded $1 million. NAM said some manufacturers are reporting increases of 200 percent to 500 percent in their product-liability premiums.

Insurance companies say they are forced to raise premiums and restrict coverage because of the increasing frequency and size of jury awards in liability cases. They also argue that a glut of lawyers in the United States has prompted many trial lawyers to pursue liability cases with the zeal of ambulance chasers.

But Scott Baldwin, a trial lawyer from Marshall, Texas, told association members Monday to ''stick to your principles'' and resist such arguments.

sense,'' he asked, ''that if a product has a defect, it is the fault of the manufacturer and not someone else?''

The lawyers also counter that insurance companies are largely to blame for their recent losses because, in an attempt to woo more customers, they underpriced coverage in the late 1970s and early 1980s. Insurers could offer low premiums then because interest rates were high and profits from investments subsidized the discounting. When interest rates fell, investment earnings no longer made up the difference.

Joseph Hegarty, senior vice president with the Alliance of American Insurers, a national association of property and casualty insurers, conceded that ''the notion that insurance companies have embarked on less than prudent management decisions is not unreasonable.

''But that's only part of the problem,'' Hegarty said by phone from the association's Boston office. ''The most significant aspect of the problem is our society's increasing litigiousness. There's been an explosion of litigation.''

Swartz, however, said that insurance companies and big businesses are using the insurance crisis as an excuse to ''turn around the progress we've made.'' Earlier this month, Ralph Nader and other consumer activists accused insurance companies of overstating their losses. Nader called for tighter federal monitoring of the insurance industry.

Florida Insurance Commissioner Bill Gunter also has launched a campaign to regulate business insurance. He has proposed legislation that would give him authority to veto rate increases for businesses' property and casualty insurance. Gunter's bill also would require insurers to give businesses 60 days' notice before raising rates or canceling coverage. The insurance industry opposes the measure.